1041 and post death interest

[joesxm3]

I will try to ask the bank tomorrow but I don't expect much of an answer.

Stepdad died in February but I could not move his bank accounts into the estate until June. I am expecting that the bank will send personal 1099-INT including the March to June interest which is taxable to the estate instead of including that interest in the estate 1099-INT.

Grok says that I shou!d act as a nominee and correct the reporting by filing a nominee 1099-INT and Form 1096.

The 1099-INT is sent to the estate. The 1099-INT and 1096 are sent to the IRS. Then, I guess, I just include the extra 1099-INT on the estate 1041. Grok says I have to send the 1099-INT and 1096 to the IRS by 2/28/2025 or 3/31/2025 if electronic.

It said not to send with the 1041, although maybe I could if I had the 1041 ready in time. I don't know if this would help or hurt.

I don't want to attract attention, but I suppose they will be happy since I am reporting extra income.

Has anyone had any experience doing this?

Thanks.

 

[SecondCor521]

My condolences.

Not yet; I've just read about it.

Part of the proper process is to list the full 1099-INT amount on his final 1040, then include an additional negative entry for the nominee interest to the estate. It talks about this in the instructions for Schedule B.

Yes, you would include the nominee interest from your 1099-INT to the estate on the 1041 on line 1.

Do not send the 1099-INT nor the 1096 with the 1041. That would be contrary to the IRS' normal way of handling things. Not following their process is not helpful for them nor for you.

The 1099-INT is something called an "information return" and there is a very long and detailed general instructions document at the IRS for how to fill them out and I think it includes how to send them to the IRS.

Note that for information returns, you might have to get original prints from the IRS - printing them off may not be acceptable. I don't know why; I think it has something to do with the IRS wanting to electronically scan them into their system.

Note that some people will say not to bother with the whole nominee thing and just report the interest on his final return. Up to you to decide.

The estate has a $600 exemption (see line 21 of Form 1041). If the total income to his estate was less than $600 and a few other basic requirements are met, then no 1041 would be required to be filed with the IRS.

Similarly, if his income while alive at the beginning of the year is low enough, he might not be required to file a 2024 federal income tax return.

You still *may* file either or both even if you're not required to do so.

If you have to file either a final income tax or 1041 return, remember that state versions of each might have to be filed. That means there might be a state equivalent to the 1041.

HTH.

 

[Texas Proud]

^^^^^^

DITTO!!

That is what I did... and I did not even read about doing it that way... but it was the way I did it when I did tax returns right out of college...

 

[joesxm3]

As expected, the bank told me allocating the interest to the correct 1099-INT is not their problem.

I was able to close the checking account. But one teller refused to do it without the court document giving permission to distribute the estate, which I did not bring with me. I was ready to give up and go get it when a guy from the desk came over and said it was not needed.